The UK government has raised fears about new security risks to Britain's telecoms networks from equipment made by telecommunications giant Huawei.

The move undermines one of the Chinese company's core arguments about why it should be allowed to bid to provide equipment for Australia's soon-to-be-built 5G networks.

A report by a body overseen by UK security officials and the country's top spy agency warned technical issues with Huawei's engineering processes had created "new risks" to the country's telecoms networks and it could only provide "limited assurance" that any security risks had been mitigated.

China said this week it was "concerned" about reports Australia's security agencies opposed Huawei's participation building an undersea cable for the Solomon Islands and Australia's domestic 5G network.

Last month Canberra agreed to fund a $200-million internet cable, from the Solomon Islands via Papua New Guinea to Australia, which was originally to be built by Huawei.

"The Chinese government always encourages Chinese enterprises to follow market principles, international rules and local laws and regulations in their foreign investment and cooperation," a Foreign Ministry spokesperson said.

"We hope that the relevant party could observe the principles of objectivity and non-discrimination, level the playing field for Chinese enterprises' normal business activities, and contribute to realising mutual benefit, instead of the contrary."

Huawei, which said this week it expected to overtake Apple in smartphone sales by next year, said on Friday the report showed supervision by British authorities was working well.

"Huawei is disappointed to learn of this process shortfall, but also welcomes the opportunity to address the concerns and ensure our products continue to deliver safe and secure infrastructure across the UK and around the world," the company said in a statement.

Mr Suffolk said on Friday the company would work with its partners to develop the necessary risk management. "We will not waver in our commitment to cyber security," he said.

The Financial Review has previously reported that security services in Australia have noted regularly that their counterparts in the UK said there was a level of "buyers' remorse" around the decision to allow Huawei to play such a a big role in its critical infrastructure.

Huawei set up a HCSEC laboratory in 2010 in Britain to check equipment in response to security concerns.

The report, which was the first time the assurances around security had been reduced, said there were technical issues that limited the ability of security researcher's to check internal product code. It also raised concern about components from outside suppliers.

Last week, Huawei was linked to a data breach in Africa. Media reports said confidential data from the African Union headquarters in Ethiopia was sent to China every night for five years.

Huawei is lobbying hard to avoid being excluded from supplying equipment to Australia's soon-to-be built 5G mobile phone networks.

The company has been lobbying hard in Australia to dampen growing political opposition to its bid.

The company has taken out full-page advertisements in newspapers, including the Financial Review, noting that "one in every two Australians depend on Huawei for their communication needs".

The United States, which is embarking on a trade war in China, has also raised security concerns around Huawei and another Chinese telecoms equipment manufacturer ZTE.